Latest Research: Planned Giving’s Positive Impact on Annual Giving

At almost 8 months into the novel coronavirus pandemic, many of us may be scratching our heads, wondering, “What’s next? When will it end? What do I need to do to keep our nonprofit above water and moving forward with our mission?”

The ever-changing rules and cultural climate can wear our work thin, shifting priorities from future planning to today’s necessities. Think: Strategic five-year plan for homeless services versus this fall’s new social distancing plan at shelter sites—or a renewed focus on annual giving versus legacy gifts.

Undoubtedly, it’s easier to sell the case for ramping up annual or one-time gift campaigns to EDs and boards, especially as we look ahead to Giving Tuesday and the end-of-year gift push. “Let’s get those gifts now to build up our reserves!” may be the battle cry, while planned giving gets the back burner.

To understand why it should be just the opposite and why planned giving should be promoted at least in tandem with annual giving is to understand everything about donors’ mindsets, especially wealthy donors.

One Ups the Other

Making a big missional impact, now and in the future, requires nonprofits to first understand big gifts, says industry authority Dr. Russell James. During a CGP Happy Hour on Friday, July 17, I was part of a small group of planned giving professionals that spent an hour with Russell as he shared some of his latest insights.

“In a time of charity crisis, some (nonprofits) will stop legacy fundraising. They will choose to chase tiny gifts of disposable income forever. Others will see the massive impact that comes from large gifts of wealth,” he says.

Simply put, wealthy donors who give to a nonprofit throughout their lifetime tend to leave larger legacy gifts. Those with estates under $2 million, Russell writes, generate estate donations worth 3.5 times their annual giving, for example. For estates $2 to $5 million, it’s 20 times. For $5 to $10 million, it’s 25 times. For $10 to $50 million, 28 times. For $50 to $100 million, it’s 50 times. For $100 million+, it’s 103 times annual giving.¹ See the positive pattern?

Legacy giving from the wealthy averages 20, 50 or a hundred years of annual giving. Legacy fundraising isn’t about tiny, incremental gifts. It’s about gifts that transform the organization. –Russell James

Stay Calm, Understand the Research              

Nonprofit leaders, both fundraisers and executive management, must not panic with pandemic fear by understanding that legacy gifts actually bolster a donor’s inclination to make larger annual gifts. Instead of a push-push mentality, or working against one another, it becomes a push-pull effect, opening doors to greater financial support over a donor’s lifetime in both qualitative (giving more) and quantitative (giving more often) measures.

Think of it this way: Current giving goes up dramatically after people include a charity in their estate plans. Bonus: The research is on your side to substantiate this fact.

James’ latest research published in UC-Davis Law Review, a Top 30-ranked law review among general/flagship legal journals in the U.S., validates this increased-giving effect. A snippet of the analysis, the chart below, taken from Russell’s research, shows how annual giving goes up after a donor creates a planned estate gift.

“Using these ‘before-and-after’ observations…inflation-adjusted giving was, on average, about 77% greater after the charitable estate planning component was added than it was before ($7,699 versus $4,355),” James writes.

Additionally, he reports, donors’ tendencies to make annual inflation-adjusted gifts of $1,000 or more rose from 51.5% in the years before the planned gift to 61.8% in the years after the gift was established.

What we said in last week’s blog bears repeating. The organizations that best weather economic storms plant seeds years in advance. This is why you must prepare the way now.

Research also strengthens the case for a strong, sustained planned giving program and holistic approach to donor relations. For teams or departments that fear that planned giving could “cannibalize” or reduce a donor’s current annual giving levels, these results clearly show the opposite effect. 

So, stand strong and keep affirming the need to invest in planned giving because your nonprofit will reap the rewards today and tomorrow. If it helps, use Dr. James language when getting support from leadership and reframe planned giving as “Major Gifts of Assets”, as all boards understand what major gifts are and the impact they can have.

How have you sold the need for planned giving, especially now? How is your team, executive management or board responding?

¹ James III, Russell N., American Charitable Bequest Transfers Across the Centuries: Empirical Findings And Implications For Policy And Practice, Retrieved July 20, 2020 from https://bit.ly/2DT0ghZ (page 271)